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I. Overview

The nuclear negotiations between Iran and the West have had their share of dashed expectations, but even by this peculiar standard, the recent diplomatic roller coaster stands out. Brimming with hope in Istanbul, negotiators crashed to earth in Baghdad, a few weeks later. That was not unexpected, given inflated hopes, mismatched expectations and – most hurtful – conviction on both sides that they had the upper hand. But if negotiations collapse now, it is hard to know what comes next. Washington and Brussels seem to count on sanctions taking their toll and forcing Iran to compromise. Tehran appears to bank on a re-elected President Obama displaying more flexibility and an economically incapacitated Europe baulking at sanctions that could boomerang. Neither is likely; instead, with prospects for a deal fading, Israeli pressure for a military option may intensify. Rather than more brinkmanship, Iran and the P5+1 (UN Security Council permanent members and Germany) should agree on intensive, continuous, technical-level negotiations to achieve a limited agreement on Iran’s 20 per cent enrichment.

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The optimism that greeted the Istanbul talks largely was illusory. Success was measured against a remarkably negative starting point – the absence of talks for the preceding fifteen months and a series of escalatory steps by all sides in the interim. The discussions themselves were largely devoid of polemics, but they also were largely devoid of substance. All were on their best behaviour because, tactically, all shared a common goal: to gain time and avoid a crisis that could lead to an Israeli military strike, risk further instability in the region, send oil prices soaring and thus complicate both Europe’s recovery and Obama’s re-election.

The problem is that the West and Iran interpreted the positive atmosphere differently. Officials from Europe and the U.S. were persuaded that Tehran’s agreement to come to the table and its non-belligerency once there stemmed principally from two realities: the devastating impact of sanctions that already have been imposed on the Iranian economy and the even more devastating impact of those that are soon to come on the one hand; and Israeli military threats on the other. The Islamic Republic also felt that it was in the driver’s seat, having strengthened its position over the preceding year by increasing its stockpile of low-enriched uranium, enriching at higher levels and completing its work on the underground nuclear facility at Fordow. With both feeling relatively strong, neither was in a mood to give in.

The two sides’ intensive efforts to increase their leverage had another paradoxical effect. The U.S. and European Union (EU) built a remarkable – and, not long ago, unthinkable – coalition of countries willing to punish Iran by hitting where it hurts most, the oil sector. To agree to any sanctions relief is made all the more difficult by the considerable effort and political capital invested in achieving them and by the knowledge that the first sign of rollback could prompt a far more comprehensive unravelling of the sanctions regime. In like manner, Iran paid a huge price for its decision to enrich at 20 per cent and forge ahead at Fordow – becoming the target of unprecedented economic penalties and losing vast amounts of money. Any retreat on these matters would have to be accompanied by momentous Western concessions lest the entire enterprise appear to be what many suspect it to be: a political and economic folly. The ironic end result is this: having accumulated precious assets that bolstered their hand in negotiations, both parties are now loathe to use the leverage they sacrificed so much to acquire.

Many predict that the current diplomatic process soon will come to a halt, with the expectation it will resume in the future. But time could be short. If negotiations collapse, precedent teaches that reciprocal escalatory steps are likely and that the hiatus will last longer than anticipated. Meanwhile, Israel – together with some influential U.S. politicians – will look at the clock ticking and Iran continuing to bolster its stockpile of enriched uranium. The clock metaphor is false – Iran is years away from acquiring a bomb, and the U.S. and Israel will have ample means, Fordow notwithstanding, to halt its nuclear program if they so choose – and one of the most damaging political images in recent history. But no matter. Senior Israeli officials believe it, and if they are persuaded that Iran is playing for time and Western nations are too spineless to do anything about it, they might act or convince Washington to act. The period until the U.S. November election is arguably the most perilous of all.

All this argues for a change in thinking. The Moscow meeting on 18 June should be used an opportunity to do just that. To begin:

instead of periodic, one- or two-day high-level, higher-stakes meetings, Iran and the P5+1 should agree on uninterrupted talks at a somewhat lower level for several months;

moreover, both sides need to drop some of their demands: there will not be significant sanctions relief at this stage, and it is equally unlikely that Iran will shut down Fordow – the only installation it possesses that could resist an Israeli strike.

Instead:

Iran should be prepared to put on the table items that would seriously and realistically address the P5+1’s proliferation concerns: suspending its enrichment at 20 per cent; converting its entire stockpile of 20 per cent uranium hexafluoride into uranium dioxide pellets to be used for nuclear fuel fabrication; and freezing the installation of new centrifuges at Fordow, while agreeing to use the facility for research and development purposes alone and accepting more intrusive monitoring;

the P5+1 should be willing to put on the table items that genuinely address Iranian concerns: accepting up-front the principle that Iran can enrich on its soil subject, until Tehran clarifies matters with the IAEA, to limitations on the level of purity and number of facilities; investing in a new research reactor and cutting-edge technologies related to renewable energies in Iran; and extending some form of sanctions relief, including one or more of the following: refraining from additional sanctions, postponing for a specified period entry into force of (or, if already in force, suspending) the EU oil embargo and/or ban on insurance for ship owners transporting Iranian oil; and easing pressure on Iran’s remaining oil customers.

The talks could well fail, and then the goal will be to avert all kinds of destructive steps, including military confrontation, the most destructive of all. But, before reaching that phase, there is much work to do to see if a deal can be reached and if what little optimism is left over from Istanbul can still be salvaged.

Iran: The Perils of Nuclear Brinkmanship

The nuclear negotiations between Iran and the west have had their share of dashed expectations, but even by this standard the recent diplomatic rollercoaster stands out. In this podcast, Crisis Group's Senior Iran Analyst Ali Vaez discusses the new briefing, The P5+1, Iran and the Perils of Nuclear Brinkmanship.

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In this podcast, Crisis Group's Senior Iran Analyst Ali Vaez discusses the new briefing, The P5+1, Iran and the Perils of Nuclear Brinkmanship.CRISIS GROUP

You can find below a transcript of this podcast.

Welcome to this podcast from the International Crisis Group. I’m Kimberly Abbott. Negotiations between the P5+1 and Iran will resume in Moscow on Monday. While the P5+1 hope to come closer to ending Iranian nuclear proliferation, Iran hopes to remove some of the sanctions that are crippling the country and maintain its civilian nuclear program.

The nuclear negotiations between Iran and the west have had their share of dashed expectations, but even by this standard the recent diplomatic rollercoaster stands out. Brimming with hope in Istanbul, negotiators crashed to earth in Baghdad a few weeks later. That was not unexpected given inflated hopes, mismatched expectations, and most hurtful, convictions on both sides that they had the upper hand.

But if negotiations collapse now, it’s hard to know what comes next. Washington and Brussels seems to count on sanctions taking their toll and forcing Iran to compromise. Tehran appears to bank on a reelected president Obama displaying more flexibility and an economically incapacitated Europe balking at sanctions that could boomerang. Neither is likely. Instead, with prospects for a deal fading, Israeli pressure for a military option may intensify.

To talk about the state of the negotiations and our new report on the issue, P5+1, Iran and the Perils of Nuclear Brinkmanship, I’m talking with Ali Vaez, Crisis Group’s Senior Iran Analyst.

So Ali, what is the likely outcome of nuclear talks between Iran and the world powers due to resume in Moscow on Monday?

It’s very difficult to predict at this stage, but all signs are pointing in the wrong direction. If we look at the problems between the International Atomic Energy Agency and Iran, pronouncements that are coming out of Tehran and Washington, and political constraints in both capitals, it’s far safer to wager on a breakdown than on a breakthrough. I think the Russians will do their utmost to make sure that the talks will not fail in Moscow, but they can’t continue, and they can’t be sustained for much longer if there is no substantial progress.

Given the substantive gaps between the two sides, how long do you think that the talks could be sustained?

I would argue that both sides are now trying to buy time, but for entirely different reasons. The western countries are trying to buy time in order to allow the sanctions to sink in and make Iran more amenable to compromise. And the Iranians are trying to buy time so that, in anticipation of a re-elected President Obama, the U.S. will be in a better position to make genuine concessions to Iran.

The problem is, time is precisely what the Israelis think they don’t have. And that is not because they think Iran would develop a nuclear weapon in the next few months, but because they think that Iran’s nuclear program will become impervious to their attacks, and specifically because of an underground facility called Fordo, which is built under a mountain.

What is the main obstacle that the negotiators will face in Moscow?

What we argue in the report is that what arguably made the resumption of the talks possible is what constitutes a principal obstacle to their success now. And that’s basically the fact that both sides have tried to accumulate leverage, as much as possible, over the past few months and now it has become extremely difficult for them to give it up. Iran has advanced its nuclear program, has enriched uranium to higher levels, has installed more centrifuges, and the U.S. and Europe have imposed an unprecedented amount of sanctions on Iran. And for both of them it is extremely difficult to reverse course at this stage.

Is the postponement of the EU oil embargo that is set to go into effect on 1 July unlikely?

This is definitely something that is very important for Iranians, but the Europeans appear reluctant to postpone the embargo, and this is mainly because it’s now already 85% in effect. The Europeans have signed new contracts with the other oil exporters. And additionally, when the U.S. sanctions on the Iran central bank come into effect on 28 June, that would make basically any transactions between an Iranian oil customer and Iran impossible, because it would make payments for purchased oil very very difficult.

What will happen if the talks fail?

A breakdown would present even more starkly the question of a military strike, whether Israeli, American, or both. But even if we don’t witness a military strike in the short-term, it would definitely mean that tensions will escalate.

And that’s what happened in the past?

Absolutely. We saw in 2005 that when talks failed, Iran boosted its nuclear program and the UN Security Council imposed new sanctions on Iran. Again in 2009, when talks reached a dead end, Iran started enriching uranium to higher levels, and the UN Security Council imposed more sanctions, and the U.S. and EU imposed unilateral sanctions. And then again in 2011, when talks in Istanbul failed, it gave way to 15 months of bellicose rhetoric, saber-rattling, sanctions, assassinations and cyber attacks.

So what would we see if the U.S. did carry out strikes, or if Israel did carry out strikes on Iran’s nuclear facilities?

It can be anticipated in the case of a strike that Iran will withdraw from the nonproliferation treaty, will expel UN nuclear inspectors, and it will use its indigenous knowledge to reconstitute its nuclear program, and this time, specifically geared towards producing a nuclear weapon. So, a strike is more likely to give rise to a nuclear armed Iran than preventing Iran from developing nuclear weapons.

So what are your recommendations in the report? What should be done to at least reach an interim deal that provides for more space and time for finding a comprehensive solution?

We have several suggestions in the report. On the format of the talks, we suggest that instead of high-level, highly sensitive, sporadic meetings, Iran and the P5+1 should hold sustained meetings, at lower-level political and technical experts, to allow for a less-charged atmosphere. On 20% enrichment problem, we recommend that Iran suspends enriching at that level and converts its entire stockpile into uranium dioxide, which is much less prone to proliferation that uranium hexafluoride. And in return, we suggest that the P5+1 should provide Iran with medical isotopes that it needs for its cancer patients, and also, cutting-edge nuclear fuel manufacturing technology. On the issue of Fordo, we suggest that Iran uses the facility as a research and development center, and put it under more rigorous inspection from the IAEA. On the issue of sanctions, we suggest that the western nations should be prepared to refrain from imposing additional sanctions and diluting some of the existing ones. And finally, on Iran’s right to enrichment, we recommend that the P5+1 should clearly convey to Tehran, that if it receives a clean slate from the IAEA, it would be able to enrich uranium on its soil, under IAEA supervision, and with some restrictions.